PEXA Group (ASX:PXA) Q4 2026 Earnings Call

0:00 Thank you. Good morning and thank you for joining us for PEX's 2026 full-year results briefing. I'm joined today by PEX's CEO and Group Managing Director, Russell Cohen, and Interim CFO, Liz Worrell, who will discuss the Group's performance for financial year-ended 30 June 2026. At the end of the presentation, we'll open up to questions. Before we begin, we acknowledge the traditional custodians of the land on which we meet today and pay our respects to elders past and present. I'll now hand over to Russell.

0:42 Good morning, everyone, and thank you for joining us today as we share our full year results. As usual, I'll start by taking you through our FY26 highlights. Following that, I'll hand over to Liz, who will walk you through our financial results for the year in more detail. We'll wrap up by discussing our FY27 strategy and key focus points and providing you with our FY27 guidance. At the end of our presentation, we'll be very happy to take any questions. Turning now to page four, I'm incredibly proud of our team for the performance we've delivered this financial year. We implemented significant cost efficiency measures in September last year in Australia, which together with record Australian transaction volumes in Q2, drove strong operating leverage and EBITDA margin expansion.

1:27 In the UK, we were pleased to deliver NatWest remortgage implementation three months ahead of schedule. Following Go Live in late March of this year, NatWest is fully functional on the PEXA UK platform. As most of you are aware, the impact of our Australian regulatory environment was mixed this year. In March, ARNIC decided to conclude the interoperability program, and on the same day, IPART released its proposed pricing methodology as part of its review of PEXA's service fees. Following this, in July of 2026, IPART released its draft report, and I'll go into this in more detail shortly. Lastly, we executed well against our strategic priorities by focusing on our core business and customer groups. We completed the strategic review of our digital solutions segment and have now substantially exited the portfolio.

2:18 We launched our AML solution, PECSA Clear, to help real estate agents and conveyances meet the new AML CTF requirements which commenced in July of 2026. We're also in the final stages of preparations for the launch of a pilot in New Zealand, which will commence later this calendar year. Moving on now to our financial snapshot on page five. The results on this reflect the result from continuing operations. Financial Year 26 was a strong year for PEXA, with group revenue exceeding $400 million for the first time, up 7% on FY25. Our EBITDA increased by 12% and our EBITDA margin expanded to 37.3%, reflecting strong operating leverage as well as savings from our cost efficiency programs and continued cost discipline. Our net profit after tax, adjusted for acquired amortisation, increased 35%, excluding significant and non-recurring items.

3:17 Statutory NPAT from continuing operations returned to a profit of $19.2 million, compared with a loss of $65.6 million in FY25. The Australian exchange continued to demonstrate excellent cash generation, with free cash flow up 39%. Overall, these results demonstrate strong underlying earnings growth and the continued improvement in the quality of our financial performance and execution. Turning to page six, I'll now take you through the performance of each of our businesses, starting with Australia. FY26 was a strong year for the business, with revenue growth supported by record transaction volumes, particularly in December. The second half volumes remained relatively resilient.

4:03 We saw changes in market sentiment impacting volumes in July 2026, which Liz will come back to later in the presentation. Operationally, we now serve customers in every state and territory in Australia. We launched remortgages in the Northern Territory in August 2025 and continue to build traction in Tasmania. We're also pleased to see digitization advance in Tasmania with the removal of the paper title requirement from the 1st of September, 2026. And we are grateful to the Land Registry and other industry stakeholders who have collaborated to bring e-conveyancing to the state. We also continue to invest in Australia with $35 million in CapEx directed towards strengthening platform security, reliability, and resilience, enhancing our customers' experience, as well as developing PECs are clear.

4:52 Turning to page 7, as most of you would know, PEXA operates in a highly regulated environment. We are required to meet stringent service standards and maintain a comprehensive compliance regime of consumer protections, most notably our regulated exchange pricing, which has not increased by more than CPI since 2014. Financial Year 26 was a year of significant regulatory activity and scrutiny. We participated in federal and state inquiries into e-conveyancing, which enabled us and other industry participants to share our view on significant industry issues. One significant development during the year was the conclusion of the Interoperability Program. Following the release in December of two independent reports commissioned by ARNIC, they decided not to proceed with the Interoperability Program as it was originally conceived. On the same day that decision was announced, IPART released its proposed methodology for its regular review of PEX's exchange service fees.

5:53 In July, IPART released its draft report recommending a 20% reduction in our regulated revenue from FY28, followed by CPI increases thereafter. As I said earlier, we strongly disagree with both the methodology and a number of the inputs IPART has used to arrive at their recommendation. So let's turn to the next slide and give you some additional colour on why we believe substantial changes are warranted to IPART's draft approach. The charts on this page come directly from our submission to IPART in their response to their draft report. To support our own submission, we commissioned independent analysis from RBB Economics and four leading academics. You can read all of these materials on our investor relations website.

6:42 Starting with chart one on the top left, we share eight alternative approaches to assessing PEXA's initial asset base. This asset base is the primary driver of the proposed revenue reduction of 20%. Starting from the top of this chart, we have three views from expert economists. We also have the PEXA 2019 trade sale price rolled forward to adjust for inflation. We just show the PEXA asset base consistent with how the tax office recognises the asset base. We show an extension of IPART's own 2019 review of our prices. We show PEXA's asset base valued using the original investor risk premium.

7:27 And lastly, we show PEXA's view, our calculation of the initial asset base, with a series of what we believe are more appropriate inputs. Looking at this chart, two things stand out. First, the outcome under a building block methodology is highly dependent on the assumptions and inputs used. Relatively small changes in those inputs can have a very significant impact on the resulting asset base, such as the early rate of return, the useful asset lives, and the year of commencement of depreciation. Second, each one of the eight alternative approaches produces an initial asset base materially above IPART's draft calculations. These divergences are significant and, in our view, need to be reconciled before such a substantial change to our pricing is made.

8:14 Chart 2 helps explain why we believe the methodology itself is a poor fit for PEXA. PEXA has a different mix of capital and operating expenditure compared to a traditional physical infrastructure business. As you can see from the table, a traditional physical infrastructure business spends between 49% and 69% of its total expenditure on capital. Conversely, only 17% of PEX's 2025 total expenditure was capital. This would result in PEXA realising a significantly lower return on its total expenditure throughout the life of the asset compared to a physical asset. If IPART ultimately determines that a building block model should be retained, we have identified a number of material issues with the inputs it has used. As Chart 3 demonstrates, correcting those inputs would increase PEX's initial asset base to about to between approximately 1.6 and 3.5 times IPART's draft assessment. Chart 4 provides another useful perspective. It compares the EBIT margins of the PEXA exchange with a range of comparable businesses. This chart shows that PEXA's EBIT margins are comparable and in many cases lower than other familiar platform businesses in Australia.

9:26 More importantly, we need to consider what this methodology means over the longer term. Our submission to IPART includes a hypothetical cash flow scenario using IPART's methodology and assumptions. If that framework were maintained beyond the current regulatory period with all other factors held constant and no management intervention, the modelling shows PEXA becoming cash flow negative within the next decade. Clearly, that cannot be a sustainable long-term regulatory outcome and we don't believe this is what IPART intended. PEXA Exchange is designated national critical infrastructure in Australia and requires continued investment to remain secure, resilient and current. A significant fee reduction could compromise this critical Australian asset.

10:13 We do not believe IPART intends to create an outcome that compromises the security and resiliency of e-conveyancing. We therefore believe there is a strong case for IPART to reconsider both the methodology and its key inputs ahead of the final report. Turning now to page nine, let's focus on PECSA Clear. This is a natural extension of our capabilities in Australia and a good example of the growth opportunities available to us outside the regulated exchange. PECSA Clear is our end-to-end AML CTF compliance solution developed to help real estate agents, conveyances and legal practitioners meet the new obligations that commenced on the 1st of July, 2026. We've deliberately kept the pricing model simple and transparent with no subscription fees or ongoing commitments. customers pay only when they use the service.

11:01 This pay-as-you-go model lowers the barrier to adoption, particularly for smaller real estate agencies and conveyancing practices, and allows customers to scale their use of PECSA Clear in line with their transaction volumes. While it is still early days, we've been encouraged by the strong interest in PECSA Clear from real estate agents, which is a new customer segment for PECSA in Australia. We expect revenue growth in FY27 to be modest as we build adoption and continue to develop the product. Over time, we believe Pexacly represents an attractive opportunity to solve a genuine customer need and extend our role across the broader property transaction ecosystem. Turning to page 10, we'll move on to our international segment, which currently is represented by our UK business. As I mentioned earlier, we made important progress with NatWest during the year, delivering remortgage capability ahead of schedule and successfully scaling volumes following launch.

11:54 I want to focus here on what this progress means for the broader UK opportunity. The successful NatWest implementation has demonstrated our platform operating successfully with a major UK lender and provided a proof point as we engage with other lenders and conveyances. At the same time, we're seeing growing momentum across the government and industry to improve the UK home buying and selling process. That reform agenda is increasing the focus among lenders on modernising transaction processes and strengthening the case for PEX's proposition. Customer satisfaction has been high, providing further validation of the platform as we focus on driving broad industry adoption. While we would have liked lender adoption of our UK platform to progress more quickly, we've established some important foundations. The technology is built and operational. NatWest is live and we have received positive feedback from customers using the platform.

12:45 With refreshed UK leadership, we are now adjusting our approach to place greater emphasis on our technology strength and execution quality. This includes working more closely with lenders and conveyances to identify and remove practical barriers to adoption and using our expertise to support the changes occurring across the UK property market as government and industry work together to improve the home buying and selling process. Turning now to page 10, we've spoken previously with you about the measured exploration of New Zealand as a potential growth opportunity. We've also been clear with shareholders about the criteria we will apply to any new market entry. This entry should be capital light. It should be de-risked through local partnerships wherever possible and supported by a regulatory environment conducive to digitization.

13:33 New Zealand meets those criteria. We are now in the final stages of preparing for a phased pilot. Phase one will focus on the purchaser's bank and solicitor. During the pilot, we'll test a defined set of AI-enabled capabilities, including simplifying document review, preparing and executing electronic signatures, and automating communications throughout the workflow. This initial phase does not include lodgement or financial settlement. However, we have formulated the high-level solutions and partnerships should we progress past our pilot. We have deliberately structured the pilot this way to test the proposition and validate customer and industry demand before committing significant capital. We expect to be in a position to update the market on our progress at our first half 27 results in February. I will now hand over to Liz for a review of our financial results.

14:22 Thanks, Russell. We'll start on page 13 with our core operating results. Consistent with the first half, in discussing these results, we will exclude discontinued operations and significant items, which are detailed on the following page. Unless otherwise stated, all comparisons are against FY25. Group revenue grew by 7% in the year, with growth across both Australia and internationally. As we discussed at the half-year results, our ongoing productivity and efficiency initiatives have continued to drive strong cost discipline. This enabled the Group to continue investing in our international business for growth while limiting Group expense growth to just 4%. Pleasingly, this resulted in Group EBITDA of $152 million for the year, up 12%, with EBITDA margin expanding almost 2 percentage points to 37.3%.

15:15 This flowed through to a core net profit after tax of 26.3 million, up from 9.2 million in FY25, representing an increase of 186%. Now, turning to page 14, we show our reconciliations of our core to statutory results. As expected, significant items in FY26 were well below prior periods, contained to 9.7 million, driven by redundancy and restructuring costs following our operating model changes in Australia. Importantly, the operating model changes delivered more than $10 million in savings to the growth in FY26. Net finance expenses were lower this year due to lower interest rates combined with $92.4 million in debt repayments during the period.

16:04 Tax on core operations increased $3.7 million to $27.3 million in FY26. As a result, higher taxable earnings from the strong performance of our Australian business. Discontinued operations from our digital solution segment made a loss after tax of $35.1 million for the year, largely as a result of impairments taken against these assets. Pleasingly, in Australia, we announced the sale at the last of these assets in August, with sale completion expected before the end of the calendar year. Next, I'll take you through the financial highlights, starting on page 15, with Australia revenue and transaction volumes.

16:52 Revenue growth of 8% in our Australia business segment was driven by record transaction volumes in the first half of the year, with volume remaining relatively resilient in the second half. We saw our overall market penetration stay stable at 90% across the year, with small gains due to growth in Tasmania and Northern Territory, offset by lower penetration in other products. Lastly, we also put through our regulator-approved price increase of 2.4% from 1st of July 2025. As I touched on earlier, while we did see transaction growth remain relatively stable in the second half of the year, But let me unpack that further for you on the next slide. We thought given the significant amount of press about the downturn in the Australian property market, we'd share more about the drivers of PEX's market volumes.

17:44 Recently, we've seen the big four banks in Australia call out declines in mortgage application activity of between 12 and 20%. And in the exchange for the month of July 26, we saw transfer volumes fall 15% versus July 25, broadly consistent with what the banks are seeing. Historically, property transaction volumes are driven by a combination of macroeconomic drivers, including interest rates and adult population growth, combined with sentiment drivers such as house prices and growth in the ASX index. In the first half of the year, a combination of lower interest rates, rising house prices and first home buyer policy support helped drive record volumes in the exchange.

18:30 In the second half, we saw this growth moderate as interest rates rose. But as you can see from our monthly year-over-year volume growth in the appendix on slide 32, it wasn't until July 26 that we saw a significant shift in momentum with a 15% drop in transfer volumes. Consistent with this, we do expect to see a double-digit fall in transfer transaction volumes at FY27, driven by the elevated interest rate environment impacting affordability, negative consumer sentiment of how prices fall, and combined with the as yet unknown impacts from the changes to negative gearing and capital gains tax. We believe these tax changes will incentivise some investors to hold properties for longer, reducing the turnover rate and the volume of transfers.

19:20 The unknown is, of course, whether this will be a short to medium term impact or a structural shift. While investors may hold for the short to medium term, for many, the reasons to sell, such as freeing up capital in retirement, will remain. What we do know is that the annualised property transaction growth rate over the last 10 years has been about 2.4%, and over the longer term, we'd expect the market to revert to this growth rate, with the unknown variable being potential structural shifts from the tax changes. Now we'll turn to international revenue and volume on page Looking at international revenue, I did want to call out excluding FX and the reduction in search revenue following the cessation of a low margin contract, which was largely offsetting cost of sales, international revenue grew by 12.2%.

20:14 This was reflected in strong margin growth, which increased by 15% for the year. This growth was as a result of price increases in SMOOTH, combined with stronger market volumes in the first half, which slowed in the second half, impacted by affordability and UK consumer confidence. As a result, sale and purchase volumes grew by just 1% in the second half versus second half 25, significantly lower than the 15% year-over-year growth seen in the first half 26. Conversely, remortgage volumes continued to recover, up 16% in the second half 26 versus second half 25, a result of an increase in fixed rate mortgages maturing in 2026.

21:02 Moving on to slide 18, we'll take a look at our costs. Group operating costs remained well controlled, growing just 4%, well below group revenue of 7%. As we've already mentioned, our cost efficiency and productivity programs remained a key focus during the year. Our operating model changes early in the period delivered more than $10 million in savings during the year. These savings combined with procurement savings and lower professional fees resulted in just over $19 million in efficiency savings for the year. These savings have been partially reinvested as PEXA continued to strengthen the exchange's cyber security and resilience. We also continue to invest in our international expansion.

21:47 While our UK second half costs didn't increase as expected, a result of taking a cautious approach to hiring in light of the slowing macroeconomic environment and pace of lender adoption, we did see an 11% increase in international costs for the year as we scaled the business. These results delivered a strong EBITDA growth in Australia, which was up 12%, with international EBITDA loss increasing $3.3 million to $41.1 million for the period. Looking ahead to FY27, we expect group EBITDA margins to decline, reflecting Australian macroeconomic headwinds, which Russell will touch on later. Moving to page 19. Following our strong operating performance, we saw free cash flows increase to $93.5 million for the year, a 64% conversion, and up from $67.2 million in FY25.

22:43 On the right-hand side, you can see the breakdown of our capex spend by business segment and by investment category. Capital expenditure in Australia for the period is slightly above FY25, reflecting investment in Peaks and Clear, as well as investment in exchange enhancements and security. International capex decreased $3.4 million to $16.5 million compared to the prior year, reflecting the sale and purchase bills largely being completed in FY25. We saw depreciation on amortization charges reduced by $1.1 million for the year due to the runoff of aging exchange and food assets, harshly upset by the impact of new FY26 assets. In FY27, we're expecting to see mid-single-digit growth in depreciation and amortization, with new assets coming online having a shorter average useful life than historical assets.

23:40 Turning to page 20, we'll now to staff capital management. The group repaid $92.4 million in debt during FY26, reducing our leverage ratio to only one time and increasing our interest cover to 9.6 times, further strengthening our balance sheet. This strength enabled us to renegotiate our existing debt facilities, negotiating more favourable margins and reducing our facility from $500 million to $330 million, while extending the average life of the facility to four years with a combination of three As many of our investors are aware, PEXA has a deferred franking debit balance, which we must reduce prior to being able to pay a frank dividend.

24:26 As we begin paying tax in FY26, the first year we've ever paid corporate tax in Australia due to historical losses, we expect to progressively reduce this balance over the coming years. In the meantime, we believe the most effective use of surplus capital is to continue paying down debt. Over time, as our capital position evolves, we will consider the most appropriate means of returning capital to shareholders. With that, I now pass back to Russell to take us through the conclusion and outlook.

24:57 Thank you, Liz. Turning now to our FY27 strategy on page 22. We started thinking about our strategy by focusing on our purpose. At its core, PEXA exists to connect people to place. That purpose underpins our strategy and how we think about our success. And success at PEXA has three dimensions. For our shareholders, it means protecting the strength of the Australian exchange, growing with discipline and delivering returns from the investments we make. For our customers, it means making property transactions simpler, faster and more secure, whether that's settling a home in Australia, meeting new AML requirements or completing a remortgage in the UK. and for our people, it means creating an environment where they can do their life's best work, where our values guide how we operate and where everyone understands the role they play in delivering our strategy.

25:48 If we deliver for our shareholders, our customers and our people, we will deliver on our purpose and create a stronger PEXA for the long term. On the next page, I'll take you through how that translates into our priorities for FY27. First, we are focused on protecting and strengthening the Australian Exchange, the engine room of our business. Our priorities are reliability, resilience and customer service while continuing to expand digital coverage across Australia. We will also remain focused on regulatory compliance, working constructively with ARNIC and through the IPART process. Second, accelerate UK adoption. We have proven the technology through NatWest and our focus now shifts firmly to adoption and transaction volumes. Our next major milestone is delivering sale and purchase with NatWest while bringing additional lenders and conveyances onto the platform.

26:37 Third, disciplined new business growth. We want to grow, but we will be disciplined about where and how we invest, focusing on opportunities where PEXA has a genuine right to win. For PEXA Clear, the priority is now driving adoption and building a profitable business. In New Zealand, as I mentioned before, the priority is to test the proposition with customers and industry before committing significant capital. Fourth, people-powered growth. Delivering our strategy requires the best people, capabilities and ways of working. will continue strengthening our team through AI enablement, focused personal development, improving collaboration between Australia and the UK, and building clearer career pathways. Together, these priorities give us a clear framework for FY27, protect the strength of our core business, grow with discipline, and execute against the opportunities we have in front of us. Turning now to page 24. Given the current macroeconomic uncertainty that Liz has talked to, we thought it would be useful to provide greater transparency around the sensitivity of our EBITDA margins to Australian transfer volumes. The majority of our group revenue is currently generated by the Australian Exchange.

27:47 While the collective revenue contribution from our growth investments is expected to remain modest in FY27, each represents an important long-term growth opportunity. These four scenarios illustrate the impact of different levels of transfer volume decline on our FY27 EBITDA margin, with all other factors held constant. In each scenario, we have assumed same low single-digit growth in the Australian refinance and other transaction volumes. Importantly, the scenarios on this page are sensitivities and not guidance. They also do not reflect any management action to improve cost efficiency across the business. Let me now address a question that I think investors should be asking of management, given the softer outlook for volumes and revenues.

28:32 What are we doing about costs? As Liz covered earlier, in FY26, we took out 10% headcount out of the Australian business and delivered $19.2 million in cost efficiencies. We do have further levers available to us, but we won't pull them to manage a short-term margin outcome while awaiting the final IPART price recommendation. While we have presented strong and well-supported arguments regarding IPART's proposed methodology, the final pricing outcome does remain unknown. When we have further clarity on the recommendation and on the implementation pathway proposed by ARNIC, we will come back to investors with more clarity on what this means for the future cost profile of the business. Against this backdrop, any further cost efficiency initiatives will be carefully considered balancing near-term financial performance with the capabilities, resilience and investment required to support the business over the long term.

29:28 We remain confident in the strength of the Australian Exchange, the opportunities across our newer businesses and our ability to respond appropriately as market conditions evolve. I'll now close with our guidance for FY27. We are guiding to group revenues of between $385 and $415 million. The range reflects the significant macroeconomic uncertainty we are seeing in Australia. Given that backdrop, we believe it is appropriate to take a cautious approach to the year ahead. We expect our Group EBITDA margin to moderate in FY27. Like other platform businesses, our business has a relatively high proportion of fixed costs, so lower Australian transaction volumes do have a direct impact on our operating leverage. This will be combined with higher costs associated with productivity tools and targeted investments in Pexaclear and our New Zealand pilot.

30:20 Similarly, Group MPAT from continuing operations is expected to decline in FY27, primarily reflecting lower Australian revenue together with these targeted investments. We continue to be disciplined in our approach to capital allocation, with CapEx expected to remain broadly in line with FY26. Importantly, our investment remains flexible and controlled, The level of spend will be linked to customer adoption in the UK and the outcome of the New Zealand pilot, so we will deploy additional capital as those opportunities are validated. In the UK, we expect a modest reduction in cash outflow, with that improvement broadly offset at a group level by investment in the New Zealand pilot. Reaching the upper end of our investment range would be driven by signing new UK customers, so additional investment would follow a demonstrated commercial progress. Before we take questions, I'd like to thank shareholders for their continued support, our customers for the trust they place in PECTA and our team members for their hard work and contribution throughout the year.

31:21 In particular, I'd like to express my sincere gratitude to Liz, who has been a valuable thought partner to me and our broader leadership team and a strong leader as we've navigated key priorities across the business. I wish her every success for the future.

31:35 I'd also like to acknowledge those shareholders and investors who've engaged constructively with the ongoing pricing review, whether through submissions to IPART or by sharing their insights and perspectives. We appreciate the time and effort you've taken to contribute to this important process and advocate for a fair and sustainable outcome. We enter FY27 with a clear strategy and a strong focus on execution. Thank you again for your time today and we look forward to keeping you updated on our progress. Well, now I'm back for questions. If you wish to ask a question, please press star followed by one on your telephone and wait for your name to be announced. That is star one if you wish to ask a question.

32:20 And your first question comes from the line of Elizabeth Milites from Macquarie. Your line is open. Good morning and thanks for taking my questions. The first one's just on the FY27 guidance. Are you able to give us colour perhaps at the NPAT line or... at the NPAT line on exactly what you're capturing in there for New Zealand expansion and also perhaps AML CTF?

32:51 Yeah, so look, it's all in there, Liz. We haven't given out and we won't be giving out specific guidance on those businesses. What we will say, though, is, you know, as you can see, the international cash outflows next year, look, we think it will be broadly flat, and that's inclusive of this additional investment in New Zealand. So it's a relatively modest investment in New Zealand. And similarly, for AML for the year, you know, the revenues we think will be reasonably modest, you know, certainly as we start to grow the business. but again, it's not a significant cash outflow either. Okay, thank you. And maybe just on IPART, obviously you've been engaging with them significantly.

33:42 You've put forward some pretty compelling cases as to potential flaws in their calculations. How have they responded to the pushback? And is there any chance, given some of the things you're suggesting are fairly material, I would imagine, for them, that the final report is delayed a little bit?

34:06 I'll take that one. Thanks, Liz. So with respect to IPART, so we put in our submission, and obviously there was an extensive public submissions, we believe, also went in. We have not received feedback on how IPART have viewed those submissions. I think they're going through their process now. to, I imagine, review all that information, our input and other stakeholders, as well as the research that we commissioned, sort of challenging the idea of the building block model and some of the assumptions, particularly around PEX's early years. So we will expect to hear from IPART similarly on the schedule that they'll communicate with the public. The second part of your question, remind me again, what was that, Liz? Sorry. Just is there any research that gets pushed out?

34:50 Yeah, sorry. Look, at this stage, we are unsure. We are operating on the timeline that has been shared previously, which is that we anticipate their final report will be published around the end of September and make its way to the New South Wales Minister. Okay, thank you. Your next question comes from the line of Ed Henning from CLFA. Your line is open. Hi, thanks for taking my questions. I've just got one on the UK and then one on New Zealand, please. Starting with the UK, can you just touch on a couple of things there? NatWest coming out in the third quarter, I imagine that's by March. Just to clarify that, that was fiscal year, not calendar year.

35:35 And is that a slight delay? I thought it was due to come through at the end of this year, the second quarter financial year. And just within that and thinking about NatWest, is it really important to get the other remortgage conveyances online? on board so then NatWest can get more of their volume to come through for remortgage to really show the benefits to potential mortgage holders and can you just touch on how that's going, please, as a first question?

36:02 Yeah, thanks, Ed. Look, it is a slight delay and it's really the delay is getting FCA approval. Moving into S&P, we do need, or sorry, NatWest actually needs some specific approvals that have been a bit delayed and will be delayed over Christmas, unfortunately. So that will push us out.

36:24 Yeah, the sale and purchase transaction for a lender in the UK is what's called a core or critical business process as designated by the regulator, Ed. And so NatWest, because they're changing that flow and their workflow, need to get those approvals. So we'll be ready to go in, we hope, March of next calendar year.

36:41 I'm sorry, Ed, what was your second question? Just more, if I think about the true benefits that NatWest are going to get, you know, if you look at Optima, they've got around 20% share. You know, you can't really go and sing to everyone and say we can do a mortgage a lot quicker unless you can get the other remortgage conveyances on board because they only can do a small proportion through Optima. How is the conversations going with the other remortgage conveyances? And is NatWest... I guess leaning on them or trying to push down that path to get the other remortgage conveyances so they can get more of their volume to come through the PECSA channel.

37:24 Yeah, no, we absolutely are. And having some really good discussions and absolutely we're focusing on NatWest's other bulk conveyances. When we've got some more committed timelines there, we'll definitely share them. But at the moment, we're actively engaging on our pathways to integrations Okay, that's great. And then just one further follow-up on New Zealand, if I can. You talk about just dipping the toe in and cap a lot, which is great. Can you just talk about how we should think about the size of the prize here for New Zealand if you do get adoption? Should we think of it like of a small state in Australia from revenue size-wise?

38:13 Ed, our solution in New Zealand is quite different to Australia from a technology perspective and a workflow perspective. When we're ready to share a little bit more on how it works, we'll do so. And from there, you can kind of size it up. I think the way to think about New Zealand for us is that we're building a new workflow process, a new workflow tool, primarily to service banks and lawyers to communicate securely and in a timely manner, and it's AI-driven. So for us, the proposition on how we charge and monetize is going to be a little bit different. That's all I'm going to share for now. In terms of TAM, it will really depend on how the services are structured, which we're still working through in the pilot.

38:58 Okay, great. Appreciate that. Thank you. Your next question comes from Josh Karanoukis from Baron Joey. Your line is open. G'day, Russell. Liz, can you be okay? Yeah. Yep. Awesome. Thank you. Just first one, just with regard to the guidance range and then linking that back to some of that helpful commentary you gave on that. transfer sensitivity. So, I mean, obviously, it's very early on in the year. We've heard a lot of backdrop around the macroeconomic hindrance and tax changes. But is it sort of implying transfers, you know, sort of down closer to the 15% range at the point? Is that how we sort of should be looking at it? And how are you thinking about, you know, the backdrop in terms of, you know, refi activity as well into 27 as you sit there today? Yeah.

39:48 Yeah, look, it'll certainly be down double digit is what we'd expect at this stage. Look, at the moment, we've seen 15% in July, but it is only one month. And when you look at that monthly chart in the appendix, you can see that it can actually move month on month and the sentiment can actually change fairly quickly. So, look, we'll have to play that out over the year, but certainly we're expecting double digit over the year. we think refis hopefully will be a little bit more you know hopefully get a little bit more growth from them during the year but we will have to say play that out but it will certainly be very modest. Okay that's great thanks Liz. Just second question just with regard to the UK so obviously great that you're getting closer to NatWest despite the slight delay there in terms of I guess the roadmap, there's been a fair bit going on and a number of players putting together a bit more of the front end of the sort of offering around speeding up the efficiencies there.

40:54 How are you interacting with some of the other players in the market and in terms of where you feel like you'll end up in terms of the best market fit, is it still focused on the back end settlement payment sort of handling? How we should think about the competitive environment over there? Thanks.

41:13 Yeah, thanks for that. So, look, you're right. The government's recent housing market reforms, I mean, they touch on a few elements, but the upfront data piece, which has been a problem for a number of years in the UK in terms of impacting the buying and selling completion journey, is a focus in this immediate period. In discussions with lenders, Josh, they're focused on the whole flow, to be candid. Upfront data, binding contracts, settlement, conveyance of digitisation, electronic signatures are All of that fits into that superior customer journey. The knowledge they have of what PEX has been able to drive in Australia is well known amongst both big and small lenders in the UK. So upfront information, yes, is a top of mind issue for the lenders, but they're very clear on how it matches with the full PEXA proposition.

42:00 Got it. And just, I guess, just maybe a second point of that is just, do you see yourselves being potentially able to capture some of the upfront pieces well over time, or do you think it's more likely to be a partnership model with some of these other established players?

42:15 Josh, more likely to be a partnership model, to be candid. A lot of the upfront players right now, they don't offer an extension into lodgement and no financial settlement. So in order to make the whole end-to-end journey easier, work, there would likely need to be a partnership model, potentially facilitated by a bank, unique to their flow, or PECSA forming partnerships. We're working with a few different industry players to understand that right now. Cool. Thanks, Russell. Cheers, mate. Thanks, Josh. Your next question comes from JP Morgan. Your line is open. Thanks, guys, for taking my questions. Perhaps just the first one around, I think iPod's preliminary view is that some of your ancillary services, such as Pector Planner, Tracker Projects, subscriber APIs, et cetera, sit outside the regulated Elno services. So I'm just keen to understand how material these unregulated products are as a proportion of your total revenue and margin pool and how fast they're growing, just in terms of how meaningful of an offset they could potentially be to any core price cut.

43:24 Yeah, no, thanks for the question. And look, if you look in our appendix on page 29, you can see we've got in there really that other revenue is the bulk of what we would call our adjacency revenues. So, it's about $5 million for the year. So, look, it's not a particularly material number. And in terms of growth, it's not an area that you can invest in possibly to grow those revenues faster than the rest of the group? I'm not sure how the economics work there.

43:58 Yeah, look, it's certainly an area that we're looking at. But, you know, the growth in those products would be modest. Okay. Yeah, noted. The second question just around, I think in your hearing with iPod, you noted that the draft pricing changes would reduce cash flow in one year by 55% and that the 5% volume risk that iPod wants you to absorb, it's remaining passes by another 25%. In aggregate, that's like a 60-65% dip, which is not small. So just interested in how you're thinking about that. If we kind of apply that to your current cash flow generation, it perhaps takes you below your cash outflow in the UK. So if you take the base case or let's say worst case of no change to iParts, how does this impact your strategy in the UK?

44:59 Yeah, look, we will of course just have to wait and see what the final recommendation is from IPART and what that implementation is then from ARNIC in due course, of course. The other factor playing in there is that certainly in our submission back to IPART, we have put in a revised volume forecast. And not surprisingly, with the drop that we're expecting to see in the volumes this year, where you would expect some of that, sorry, we shouldn't say we expect, but certainly in our forecast, we have got some of that flowing through, which essentially means that some of that drop in the free cash flows, you're already going to see it in FY27. So it might be quite as big a decrease if it was implemented as planned.

45:52 On the DVAM, sorry, which is that demand volatility adjustment, we've actually recommended that we don't keep that. We don't think it's the right thing for the business long term. But, of course, it will just remain to be seen. And then as a result, our investment into the UK, you know, look, we're certainly committed to the UK. You know, we've certainly got enough liquidity and liquidity lines available to us. as it stands. Okay. Thanks for that. And perhaps just the last question around the conversations you're having with other large banks in the UK. I think... Previously, the thinking was that we could see some other banks as fast followers post-NetWest going live with RIMOs.

46:45 So just how you're thinking about that now, how those conversations are progressing, and if you think S&P will need to go live as well before you see other banks move?

46:57 Thanks, Taryn. I'll take that one. So look, S&P with NatWest, we're targeting March. So that's very much part of the relationship and the contractual agreement and the solution we've built with NatWest. So that's very much on the train. In the financial year, obviously, we would have liked other lenders to come on board, as I mentioned in my script. We keep and remain engaged with all the Tier 1 lenders and many of the Tier 2 lenders. We keep engaged with the mortgage origination software providers that facilitate a lot of the loan transactions for the Tier 2 and mutuals. So there are many concurrent conversations. I'd say one interesting and positive development in the last, let's say, six to nine months has been we've been engaging with the lenders also from a collective perspective. How might the lenders do something together? How might the industry move together towards greater digitisation?

47:42 So that's something that's kind of a change in tone, and I think it's very much linked to the UK housing market reforms that the government's spoken about in terms of digitisation. Thanks, guys. That's what I mean. As a reminder, if you wish to ask a question, please press star followed by one on your telephone and wait for your name to be announced. Your next question comes from the line of Kieran Chichty of UBS. Your line is open. Morning, Russell and Liz. I'd just like to start with the first question coming back to the volume price interaction under sort of IPART's proposal.

48:28 Yeah, I think you mentioned, Liz, in your submission, you're clearly flagging a lower volume outlook. Can you just talk us through what's been discussed with them and how we should be thinking about a weaker transactional backdrop in 27 and how that might impact the price per transaction from 28 onwards? Have they committed to reassessing the transaction requirements volume that's sort of implied within those prices ahead of sort of formalising or locking in pricing?

49:02 Yeah, no, look, they haven't committed to it. What we do know is that we've certainly shared, though, our model. And, you know, we've also seen their model. So we know our models are reasonably aligned. And as you saw from our submissions, We certainly, if you update the models for the more recent experiences and macroeconomic factors, we'd expect it to come down. But there is no guarantee. We can't predict what IPART will do and they won't give us that guidance on that. But look, it is very key because, of course, IPART in how they've calculated, they calculate a revenue requirement.

49:48 and then they use their volume forecast to back solve the price. So it certainly will be a critical input and we've certainly shared our views with them on those numbers. Right, and sort of just given their final reports to you on 30th of September, you know, we'll only be a couple of months into softer activity. Yeah, will there be... a further review point, do you believe, or is sort of that pricing in that September report likely to be the final view?

50:27 As far as we know, what is in the final report is likely the recommendation that will go to ARNIC and then ARNIC will complete their own work jurisdiction by jurisdiction. That's the best understanding we have right now. There could be more questions that come back to PECSA on a range of topics, but right now, from a process perspective, that's our best understanding, Kieran. All right. Yep. Just a second question sort of on the longer-term future review impacts. Russell, sort of the comments you made around going cash flow negative sort of for minimal cash flow by 34, I think, was in your submission. I know you haven't had detailed impact feedback from IPART so far, but that is a pretty critical aspect, I guess, the declining IAB over time. Has there been any response in regards to sort of, I guess, what a roll forward of the currently proposed model would mean longer term?

51:29 No formal response, Kieran. We have highlighted that and we did highlight that quite soon after we read the draft and had done our own analysis and it became clear that the way in which the building block model had been structured, the way in which the calculation had been structured in the IPAR draft report would have this peculiar impact of really pushing PEX's free cash flow negative over the next 10 years. For that reason, as I said in my script, we believe it's not the intention of IPART for that to be the case. We think it's an unintentional calculation and almost like a quirk in the model as a result of using the building block methodology and some of the assumptions that were included. And so we've made it very clear there is a way to correct it.

52:16 There are more appropriate models. It's all laid out in our submission. and we are hopeful that IPART will take that on board. One important thing is that should they stick with the methodology and should the draft report become the final recommendation and PEXA was trending towards that hypothetical negative free cash flow picture, there would likely need to be a review of the right methodology in the next period. And so one of the really important things is I don't think anyone wants the third pricing methodology to be applied to a business like PEXA in three IPART reviews, 2019, 2020, 2026 and then, you know, 2031 or 32. So we think that's just a really undesirable outcome for any regulated space and we made that pretty clear in our submission. All right. And if the current proposal from IPART moves ahead sort of with no changes, like I presume we're looking at a fairly decent intangible write-down and change in the acquired amortization profile moving forward?

53:19 Yeah, if you have a little 3B account, we have called out that, look, a reasonable costable change could result in an impairment. Look, it's sub $50 million, but it is a possibility. Okay. And then just a final question, PECSA Clear. Sorry, I might have missed a comment earlier, but can you just give us a quick update on how that's progressing?

53:47 Yeah, I'll take that one. So look, it's progressing well. We found really nice product market fit, in particular with the real estate segment in Australia, Kieran. Real estate agents were not a customer grouping that PEXA had served throughout its history. So yeah, getting to know that segment. Obviously, it's a separated business from the PEXA Exchange. We have distinct salespeople and distinct tooling, distinct marketing, and that's resonated really, really well with that segment. We have a number of lawyers and practitioners as well using the tool who are familiar with the PEXA brand. But it's really been the real estate segment that's connected well. The pay-as-you-go model has been really, really well received. We're just kind of fine-tuning our operational processes. You know, the AML regime is new for everyone in Australia for property, and so there's a lot of understanding and education that's needed to occur across the market, as well as, you know, really the compliance onboarding with AUSTRAC.

54:37 So it's been a really good learning for us. I'm really happy with how the team have performed and how the product works. And now we're just kind of fine-tuning some of the operational processes. And materiality, Russell, for 27, is it still fairly small in terms of the broader group?

54:55 Yeah, it is, Kieran. Financially, it is still very much a startup software product. I mean, we've come into a market with some very established players that have been around for a long time, so we're really trying to carve out our niche and our differentiator. All right, I'll leave it there. Thank you. Thank you. Your next question comes from the line of Christian Waite from Jaden. Your line is open. Hi, thank you for taking my question. I'm just a follow-up question on the pricing free cash flow step down at the next review. In your response to iPod, you note the RAB will fall to $214 million, I assume as the unrecovered cost balance drops off.

55:43 Shouldn't Texas still be getting a return on capital on that balance? So I guess, what is the discrepancy that's bringing a free cash flow to flat or negative? And also, I assume that doesn't include interest on client accounts and how to think about that also?

56:01 Yeah, So, look, when you look at it and how they calculate, actually, that return on capital, it's based on the asset base. And, you know, it's starting with that initial asset base. And as they called out, they did include some initial costs in that asset base. But they actually start depreciating those costs in the year that they were spent. So, you know, the cost back in sort of pre-2019, a lot of that will have been fully amortized. certainly by the end of the, you know, 2031. And that is why the asset base falls off so fast. And so that is, and that's sort of absolutely one of our key points back to IPARN is that it makes no sense to start depreciating that asset base as it was, you know, in the year that it was spent when clearly we weren't getting any return on that asset base at that point in time.

56:59 So, you know, there's certainly more detail on that in our detailed report if you want to read it in there. Yeah. Well, I guess the question was more so, I understand that the asset base drops, but, you know, assume you do receive a return on capital on that asset base. I mean, assume 6.5% WAC should be, I don't know, close to $15 million. What is the discrepancy between that, let's say, $15 million and the slightly negative free cash flow forecast that you've put in your responses. That's more so the question.

57:35 And look, it's really just the timing. So it's the timing of that depreciation profile as well as the capex that we would expect. So if you just roll forward the capex at sort of the consistent rates of what IPART had assumed, it is just kind of a timing thing. So over time, you certainly wouldn't see under their model permanent negative cash flow. It would even out over time and become sort of a stable, low single-digit net cash flow number. Yeah, understood. And just one more question on the UK specifically. In terms of Do you have any comments on the tokenization kind of initiative happening in the UK, GBTD, and that the banks are all participating in?

58:27 Any thoughts on that and if that is a threat in any way?

58:32 So we're also participating in a range of synchronization, let's say, workshops and engagements and pilots. We've obviously got a partnership with MasterCard, which is a variation on that, and we're testing some interesting technology with them. sort of fitting in with the theme around synchronization and delivery versus payment concepts that we, as in Australia, know very, very well. I don't have any particular comments on how the bank's using synchronization. I know there's a lot of pilots going on. So yeah, when and if we've got more to share, we'll do so publicly. I think the most public we've been is on how we're working with MasterCard on testing their version of that. Okay, understood. Thank you for taking my questions. Thank you. As there are no further questions, I would like to thank our speakers today for this presentation and thank you all for joining us.

59:22 This now concludes today's conference. You may now disconnect.